15 December 2006
After emerging market equity funds set an all-time inflow record in the first half of 2006, only to see it erode away as half of those flows were removed by investors in the May-June global equity sell-off, a recent surge of new money has again taken net inflows to record levels. The $1.65 billion placed with emerging market equity funds in the week ending December 13 brings year to date flows to $20.8 billion, surpassing last year's record $20.3 billion of inflows.
And in the same week the Emerging Market Bond Funds also set an all-time inflow record in USD terms as the $686 million of net inflows brings year to date inflows past the $6 billion mark, exceeding last year's record setting $5.7 billion inflow total.
Flows in 2005 were still stronger than this year in percentage of total asset terms for both EM equity and bond funds (15% vs. 10% for equity and 25% vs. 18% for the bond funds), since the inflows and the appreciation of their holdings have dramatically increased the total assets of these fund groups.
With two weeks remaining in 2006 the preference of global investors for global and international exposure over that of US exposure is stark. Supplementing EPFR's monthly fund flow data through the end of October with the weekly flows data through mid-December, the non-US equity funds tracked (Global, EM, Europe, Japan, Pacific, etc.) have received more than $100 billion of net inflows this year, while US Equity Funds have seen outflows of more than $10 billion.
Investors continued to reallocate money towards riskier but more rewarding assets. Global Emerging Market (GEM) Equity Funds enjoyed their best week since late April and flows into Global Equity Funds were also at levels last seen in late 1Q06. All of the major emerging markets equity fund groups - GEM, Asia ex-Japan, Latin America and EMEA - took in fresh money, the first time since the beginning of August that all have posted net inflows in the same week. Japan Equity Funds were the only geographically focused fund group tracked by EPFR to post outflows during the week.
A strong rebound by GEM funds and a 13th straight week of inflows into Asia ex-Japan funds underpinned the best week for the combined Emerging Market Equity Funds tracked weekly by EPFR since early May. Collectively these funds pulled in $1.65 billion, with funds focused on China, Taiwan and Hong Kong accounting for $559 million of that total. China focused funds have firmly supplanted the so-called BRICs (Brazil, Russia, India and China) Funds as the main driver of emerging markets fund flows. Those BRICs funds, which through the first 18 weeks of the year accounted for half of all emerging markets inflows with over $10 billion coming through their doors, have posted net outflows of $404.6 million since the second week of May.
Global Equity Funds also enjoyed a banner week as investors committed another $1.69 billion to these funds, the most since the first week of March. Year-to-date these funds have pulled in $30.2 billion and posted collective portfolio gains of over 20% compared to $19.68 billion (a record) and 15.3% in 2005.
Meanwhile Europe Equity Funds had another solid month, pulling in $516.9 million for the week despite the European Central Bank's recent rate hike. These funds have long since eclipsed the inflows record they set in 2004 as investors bought into the Eurozone's economic recovery and its currency appreciation story.
At least some of the money pouring into most fund groups came from the $10.1 billion pulled out of US Equity Funds during the preceding two weeks. These funds were back in the black this week, albeit barely, as investors reallocated money from Large Cap Funds to Small and Mid-Cap Funds. Large Cap funds posted net outflows of $1.85 billion for the week while Small and Mid-Cap funds recorded inflows of $1.3 billion and $1.1 billion respectively
Bringing up the rear, in terms of flows, were Japan Equity Funds, which posted a tiny net outflow as investors kept their distance from a market which has struggled this year and has yet to convincingly escape the clutches of deflation. Year-to-date flows into these funds are essentially neutral and stand in stark contrast to last year when, with two weeks to go, these funds had absorbed over $10 billion of new money. The last time Japan Equity Funds sustained net outflows was in 2002. From 2003-2005 these funds, with $62 billion in total assets, received $25 billion of net inflows.
Global and US Commodities/Materials Funds were the standouts among the sector funds during the second week of December. Flows into Global Commodities Funds were driven by Exchange Traded Funds which took in a net $349 million for the week. ETFs also accounted for the lion's share of flows into US Commodities Funds. Among the actively managed funds, it was US Utilities Funds that fared best, with ETF's accounting for only 11.5% of the $289 million these funds took in during the week. Active Global Real Estate Funds also attracted significant inflows, but these flows were more than offset by redemptions from Global Real Estate ETFs.
Fixed income funds benefited from the US Federal Reserve's decision to keep interest rates on hold for the fourth consecutive meeting. The Emerging Market Bond Funds that report on a weekly basis to EPFR enjoyed their best week since early September as year-to-date inflows pushed over the $6 billion mark, exceeding last year's full-year total. It was a similar story with Global Bond Funds: they ran their winning streak to 18 straight weeks and are now some $300 million ahead of last year's record setting total with two weeks to go. High Yield Bond Funds were in the money for the seventh time in the past eight weeks as speculation about airline mergers fueled strong interest in this asset class.
-Ends-
ABOUT EPFR
Cambridge, Massachusetts-based Emerging Portfolio Fund Research, Inc. (EPFR) tracks equity and bond fund flows, cross border capital flows, country and sector allocations, and company holdings data from its universe of 15,000 international, emerging markets and US funds with $7 trillion in assets. EPFR data comes directly from funds or their administrators and includes funds registered in the major domiciles of North America, Europe, Asia and other offshore domiciles. The data shows trends in global institutional and individual investor sentiment and is used by top emerging markets and international analysts, strategists and portfolio managers. The firm also provides investment management clients with qualitative analysis on international markets and operates EmergingPortfolio.com, an Internet site for institutional investors in emerging markets and listed in Forbes Best of the Web.
For more information please contact:
Brad Durham
Managing Director
Email: durham@epfr.com
Tel: (+1-617) 864-4999, x. 24
After emerging market equity funds set an all-time inflow record in the first half of 2006, only to see it erode away as half of those flows were removed by investors in the May-June global equity sell-off, a recent surge of new money has again taken net inflows to record levels. The $1.65 billion placed with emerging market equity funds in the week ending December 13 brings year to date flows to $20.8 billion, surpassing last year's record $20.3 billion of inflows.
And in the same week the Emerging Market Bond Funds also set an all-time inflow record in USD terms as the $686 million of net inflows brings year to date inflows past the $6 billion mark, exceeding last year's record setting $5.7 billion inflow total.
Flows in 2005 were still stronger than this year in percentage of total asset terms for both EM equity and bond funds (15% vs. 10% for equity and 25% vs. 18% for the bond funds), since the inflows and the appreciation of their holdings have dramatically increased the total assets of these fund groups.
With two weeks remaining in 2006 the preference of global investors for global and international exposure over that of US exposure is stark. Supplementing EPFR's monthly fund flow data through the end of October with the weekly flows data through mid-December, the non-US equity funds tracked (Global, EM, Europe, Japan, Pacific, etc.) have received more than $100 billion of net inflows this year, while US Equity Funds have seen outflows of more than $10 billion.
Investors continued to reallocate money towards riskier but more rewarding assets. Global Emerging Market (GEM) Equity Funds enjoyed their best week since late April and flows into Global Equity Funds were also at levels last seen in late 1Q06. All of the major emerging markets equity fund groups - GEM, Asia ex-Japan, Latin America and EMEA - took in fresh money, the first time since the beginning of August that all have posted net inflows in the same week. Japan Equity Funds were the only geographically focused fund group tracked by EPFR to post outflows during the week.
A strong rebound by GEM funds and a 13th straight week of inflows into Asia ex-Japan funds underpinned the best week for the combined Emerging Market Equity Funds tracked weekly by EPFR since early May. Collectively these funds pulled in $1.65 billion, with funds focused on China, Taiwan and Hong Kong accounting for $559 million of that total. China focused funds have firmly supplanted the so-called BRICs (Brazil, Russia, India and China) Funds as the main driver of emerging markets fund flows. Those BRICs funds, which through the first 18 weeks of the year accounted for half of all emerging markets inflows with over $10 billion coming through their doors, have posted net outflows of $404.6 million since the second week of May.
Global Equity Funds also enjoyed a banner week as investors committed another $1.69 billion to these funds, the most since the first week of March. Year-to-date these funds have pulled in $30.2 billion and posted collective portfolio gains of over 20% compared to $19.68 billion (a record) and 15.3% in 2005.
Meanwhile Europe Equity Funds had another solid month, pulling in $516.9 million for the week despite the European Central Bank's recent rate hike. These funds have long since eclipsed the inflows record they set in 2004 as investors bought into the Eurozone's economic recovery and its currency appreciation story.
At least some of the money pouring into most fund groups came from the $10.1 billion pulled out of US Equity Funds during the preceding two weeks. These funds were back in the black this week, albeit barely, as investors reallocated money from Large Cap Funds to Small and Mid-Cap Funds. Large Cap funds posted net outflows of $1.85 billion for the week while Small and Mid-Cap funds recorded inflows of $1.3 billion and $1.1 billion respectively
Bringing up the rear, in terms of flows, were Japan Equity Funds, which posted a tiny net outflow as investors kept their distance from a market which has struggled this year and has yet to convincingly escape the clutches of deflation. Year-to-date flows into these funds are essentially neutral and stand in stark contrast to last year when, with two weeks to go, these funds had absorbed over $10 billion of new money. The last time Japan Equity Funds sustained net outflows was in 2002. From 2003-2005 these funds, with $62 billion in total assets, received $25 billion of net inflows.
Global and US Commodities/Materials Funds were the standouts among the sector funds during the second week of December. Flows into Global Commodities Funds were driven by Exchange Traded Funds which took in a net $349 million for the week. ETFs also accounted for the lion's share of flows into US Commodities Funds. Among the actively managed funds, it was US Utilities Funds that fared best, with ETF's accounting for only 11.5% of the $289 million these funds took in during the week. Active Global Real Estate Funds also attracted significant inflows, but these flows were more than offset by redemptions from Global Real Estate ETFs.
Fixed income funds benefited from the US Federal Reserve's decision to keep interest rates on hold for the fourth consecutive meeting. The Emerging Market Bond Funds that report on a weekly basis to EPFR enjoyed their best week since early September as year-to-date inflows pushed over the $6 billion mark, exceeding last year's full-year total. It was a similar story with Global Bond Funds: they ran their winning streak to 18 straight weeks and are now some $300 million ahead of last year's record setting total with two weeks to go. High Yield Bond Funds were in the money for the seventh time in the past eight weeks as speculation about airline mergers fueled strong interest in this asset class.
-Ends-
ABOUT EPFR
Cambridge, Massachusetts-based Emerging Portfolio Fund Research, Inc. (EPFR) tracks equity and bond fund flows, cross border capital flows, country and sector allocations, and company holdings data from its universe of 15,000 international, emerging markets and US funds with $7 trillion in assets. EPFR data comes directly from funds or their administrators and includes funds registered in the major domiciles of North America, Europe, Asia and other offshore domiciles. The data shows trends in global institutional and individual investor sentiment and is used by top emerging markets and international analysts, strategists and portfolio managers. The firm also provides investment management clients with qualitative analysis on international markets and operates EmergingPortfolio.com, an Internet site for institutional investors in emerging markets and listed in Forbes Best of the Web.
For more information please contact:
Brad Durham
Managing Director
Email: durham@epfr.com
Tel: (+1-617) 864-4999, x. 24
Ian Wilson
Director, Fund Data
Email: ian@epfr.com
Tel: (+1-804) 217-8653
Cameron Brandt
Global Markets Analyst
Email: brandt@epfr.com
Tel: (+1-617) 864-4999, x. 22
© Press Release 2006
